Sunday, January 3, 2016

Draft Response to TRAI in support of differential pricing for Data services

This is a draft response to TRAI on their consultation paper on Differential Pricing for Data Services. Please feel free to comment, suggest improvements and most importantly use in part or in whole to send in your comments in support of Differential Pricing for Data Services. (Structure borrowed from the STI campaign)

Emails should be sent to advisorfea1@trai.gov.in

Dear Sir,

Thank you for this Consultation Paper on Differential Pricing for Data Services; The TRAI should bring in rules that foster innovation not just in the Internet services Domain, but also in the domain of Internet access. This will invariably mean to allow a free hand to TSPs to innovate in distribution and pricing. This would include differential pricing - especially the practice of “Zero Rating” and other such innovations.

I hope the TRAI considers my answers.

Thanking you

My answers:
Question 1: Should the TSPs be allowed to have differential pricing for data usage for accessing different websites, applications or platforms?

Telecom Service Providers should be allowed to have differential pricing for data usage for accessing different websites, applications or platforms.
  • This is no different from how Internet services and software firms create and price products for different classes of customers (by geography, economic capacity even feature set). They do so to be able to increase marketshare, improve revenue yield in the hope of being able to make money after a given period.
  • While the freedom for differential pricing is made available and is unquestioned in the case of commercial services by Internet Services and software firms. This freedom of differential pricing is being denied to commercial services by TSP firms.

Price differentiation is a reality in whichever space we care to examine. Better seats in a cinema, tiered cost of power, end use based coal prices etc.

Price differentiation may be advantageous to aid the spread of the Internet across India. It may lead to temporary walled gardens, but eventually, customers will escape from such a garden. In the interim, customer base will expand far faster than previously believed imaginable. I would like to cite three examples to illustrate this.
  1. America On Line (AOL) which ran a walled garden accounted for 10% of the TOTAL customer base in the WORLD. This was achieved on the backs of aggressive marketing funded by the services available on the network. Ie the services paid to be in the network. With these funds AOL sent out millions of access kits to potential customers and provided them a fast ramp on to the (walled garden) internet. The customers would also pay for this privilege. Once customers got used to using the Internet, they sought better and wider coverage and competition provided the right type of services for them to graduate to them.
  2. The current surge of growth of Internet services is on the back of mobile apps driven by Apple. The one thing most people miss about this revolution is that app stores (from where you can download he apps) are effectively walled gardens. An open garden approach was available to the world in the form of competing platforms like Symbian. But it was the walled garden approach of Apple that finally kicked things into high gear. A lot of Venture Capital was spent to capture market share in India and other markets of the world. The operators of these walled gardens have changed rules arbitrarily and yet the ecosystem survived and grew dramatically. Eventually, now there is fatigue with apps and people are now demanding that the services be again available on the general web, so that they don’t have to deal with dozens, if not hundreds on apps on their devices. The recent u turn of Flipkart from app only back to web is illustrative of how people want to escape the walled garden after the initial novelty wears off.
  3. The final example is in the form of the iMode service by DOCOMO in Japan. The iMode service was a walled garden where content providers paid a cut and were subject to significant controls by the operator. In 4 years, the network had over 35 million users. The competitive response was to create similar managed gardens of their own. As people in Japan sought better services, they discarded those gardens in favour of the open web.
In all the above cases, the open web succeeded, but what those years of competition and walled gardens did was to get people hooked on to data services.

Some other arguments that have been made, I would like you to take an objective view of them.
  • It is argued by some that TSPs are merely dumb pipes. This is a dangerous argument. It’s like saying electricity companies cannot innovate because they provide utility services. They could for instance become TSPs or even IPTV providers on their own right if regulators don’t prevent them.
  • There is an argument that there is no commercial justification of Telcos to indulge in differential pricing. This is a false argument. Telcos have every justification to gain as many customers and thereby marketshare as possible. Even if it means going into areas previously unserved and creating markets through innovative offerings like Zero rated services. Which brings to the fore the need for differential pricing.
  • It is said spectrum is a public utility and TSPs have no right to further business interests. This is again a false argument. Without business interest, no firm will participate in any activity related to utilities. Coal is a public resource, which firms use to further interests in steel, electricity and others.
  • There is an argument that consumers who stand to benefit from differentially priced Internet services will not be aware of the full internet. This is highly patronising to say the least and assumes that consumers are fools.

Other points not touched upon yet.  
  • Currently Doordarshan runs a service called DD Direct Plus, which carries free channels. This service has neither run other services out of business, nor the content companies that ride on it. This is the closest analogy to the current consultation paper.
  • Cable operators and DTH operators charge content firms for carriage. This has been a practice since the dawn of the service in India. This has neither led to the closure of channels, nor led to a curtailment of new channels launched.
  • The views against differential pricing seek for regulation/ban basis forecasted harm. If this is the norm, cars should not be allowed on to the roads due to accident deaths and pollution potential.
  • This is a business to business relationship, and anti-competitive, behaviour, collusion etc, ideally should fall under the ambit of Competition Commission.

What will work best for end consumers is a market driven process which allows developers, content companies, hardware providers and networks compete to discover pricing and market fit of those services. When market entities compete for customers and answer to shareholders, a complex balance is achieved. The alternative, is for business models to be run by regulators. Liberalisation in India has shown, that this is not the best way for any industry to grow.

Question 2: If differential pricing for data usage is permitted, what measures should be adopted to ensure that the principles of non- discrimination, transparency, affordable internet access, competition and market entry and innovation are addressed?

     1) Non-discrimination:
  • If it is free for content providers to participate on price differentiated platforms, it should be free for all.
  • If there is a pricing scheme on price differentiated platforms, that scheme should be published in advance.
  • Pricing schemes basis bandwidth consumed (video vs plain text, heavy usage vs light usage) etc could also be in place.
  • Compulsory targets (ever increasing) on the number and quality (as determined by popularity) of websites in the program could also be introduced.
      2)  Transparency: 
  • Customers must compulsorily be provided the option to be able to subscribe to unsubsidised internet and intimated to the customer.
  • Every time a customer starts using a price differentiated service, he should be intimated that this is a limited service and full service is available. This should also be in place, every time a customer jumps from a free section to a paid section.
  • This could be through messaging on start/end every time a service is initiated and every time a customer makes a jump to the unsubsidised internet.
  • The price of unsubsidised service should be same or lower than the areas where differentially priced service is not available.

Question 3: Are there alternative methods/technologies/business models, other than differentiated tariff plans, available to achieve the objective of providing free internet access to the consumers? If yes, please suggest/describe these methods/technologies/business models. Also, describe the potential benefits and disadvantages associated with such methods/technologies/business models?

Yes, several alternatives exist other than differentiated tariff plans or zero rated services.

Govt subsidies. In a country where access to clean water is a struggle, there is little point in asking to subsidise the Internet. It is far better to allow a private corporation to do it with non-public funds.

Advertising subsidies. 
  • This is an option available in the differentially priced access as well. As such it is not an independent solution. 
  • If this were a practical way to drive a universal access solution, there already would have been services out in the market. Fact is, that there is that these services have been tried and failed in the cities. Not sure how they will succeed in the poorer parts of the country.
  • Even with the above and other options, a differentially priced option remains another option that should be explored. The moment private corporations interests are aligned with the interest of spreading the internet, they will deploy resources to achieve their targets.



Question 4: Is there any other issue that should be considered in the present consultation on differential pricing for data services?

I believe TRAI will take my answers into consideration in forming its opinion. Several experts in the field hold similar views on zero rating. Net Neutrality is not the holy grail of how access needs to be sold in India. It is a Business to Business affair and businesses should be allowed to figure out the market dynamics of it.

I urge you to read the following URL (some excerpts included below):
Robert Kahn (Senior figure in the development of the internet}:
"If the goal is to encourage people to build new capabilities, then the party that takes the lead is probably only going to have it on their net to start with and it's not going to be on anyone else's net. You want to incentivize people to innovate, and they're going to innovate on their own nets or a few other nets,""I am totally opposed to mandating that nothing interesting can happen inside the net," he said.So called "Neutrality" legislation posed more of a danger than fragmentation, he concluded.
 
Additionally, it should be brought to your notice that a pressure group has used deceptive methods, including emotional appeals, to get supporters to submit their responses to the present consultation. Several of those users may not understand the issue they are supporting. 

Saturday, January 2, 2016

Why opposition to Free Basics is flawed


If purists are so offended by a limited offering, just don’t call ‘Free Basics’ the Internet
 A lot has been said about Free Basics, the free limited internet program by Facebook and its telecom partners. Mostly by people opposing it. Facebook is spending (reportedly) Rs 100 crore and using its own properties to make it a success.
It is ironical that people who claim to be avowedly pro-market are the loudest opponents of Free Basics. So much so, there is hardly a major voice that stands for it. Supporting it, is almost like supporting bigotry, and invites accusations of shilling for Facebook.  In the spirit of Laissez-faire, it is my contention that Free Basics should continue. Whether it succeeds or fails is something that the market should decide.
Let us analyse the main arguments that we have heard against Free Basics and why we should have a different view on them.
Who pays for it?
Since FB doesn’t pay Telcos for bandwidth. Telcos make too much money from us and are giving away bandwidth.
From the Telcos perspective, this is a marketing expense to acquire new customers. Unless the argument is that marketing itself are causing higher prices. In which case you should be complaining about the hundreds of crores being spent on marketing and customer service points.
The Telco has its own shareholders to answer to. If the costs of the program are not commensurate with returns (new paid signups), they will exit the program.
May have ads
FB says it will not have ads, but does not say it will never have ads.
This is irrelevant for three reasons.
First, making money is not a crime; Quoting Adam Smith:
“It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.”
Second, most content on the “open” Internet is subsidised by advertising. In that sense you are today a free customer, you just pay for access. Free Basics just takes that subsidy forward. Today that cost is borne by Telcos, tomorrow it could be by advertisers. It remains the end user’s choice, whether s/he wants heavily subsidised access to a few websites (aka Free Basics) or lightly subsidised (aka open Internet) or even, not subsidised (paywalled) Internet.
Third, when ads start appearing, Telcos will ask for a piece of that pie, thereby negating the first concern.
Privacy and FB access to usage data
This argument would be valid, if we ourselves stopped using Facebook and ALL sites that used Facebook integration. If we are not willing to let go of these services, who are we to set a higher standard for the target audience of this program?
FB does not have legitimate support.
FB may claim 3.2 million in support, but how many of those mails are legitimate?
The same statement could be made of the campaign against Free Basics. Have all those people who have signed up to oppose, fully understood the argument?
It’s keeping only FB and partners free
Yes it is. The market will produce its own challengers with wider offerings. Nothing stops Airtel and Google to create a similar offering of their own.
It’s not an open platform
FB sets the rules and can change those anytime.
This is correct. The answer to this is to codify the rules via regulation. Not a ban. Again competitors can come in with their own versions.
It will hamper innovation
It will become more expensive for startups to create products and services
People (including the poor) do pay for better service. Govt run schools and hospitals vs private schools and hospitals. If you have a great product, people will find their way to it. 
What are the alternatives?
Government subsidies
The government could subsidise ‘open’ Internet. And we will pay for it though taxes. Taxes that could be used in areas where private enterprise cannot function profitably, at scale.
Other models that are ad subsidised, user funded
There may be other models we like. And Free Basics is yet another such model. Two classes of market participants have come together to innovate on how to get millions of Indians online. Without the use of public funds.
The entire argument against Free Basics assumes, that the target customer and the telco are irrational actors, unintelligent to the ways of the world. 
There is a video by AIB that (correctly) mocked the fact that FB opened it’s voting on Free Basics to US audiences. Similarly it is laughable that active digital Indians get the right to decide how other Indians get on to the internet.
Tiered access as a solution
Most Net Neutrality champions are comfortable with the thought that advertising is a subsidy. Why should you have to treat Internet access differently? As long as the choice of higher priced 'open' internet remains available to customers? The idea is neither radical, nor new.
Telcos, Facebook and participating sites are businesses operating in an open market. When you choose to champion an anti-Free Basics campaign, you are essentially moving away from a pro-markets stance. 
If purists are so offended by a limited offering, just don’t call it the Internet.
Chirag is a technology executive turned entrepreneur bringing offline businesses and online user experiences closer together. He tweets as @chirag and blogs at www.marlinspike.in 
This article originally appeared on Business Standard.

Saturday, October 17, 2015

The clash of the new age sellers vs traditional sellers


In the book “Clash of Civilisations and the remaking of the world order” Samuel P Huntington wrote:

“The West won the world not by the superiority of its ideas or values or religion […] but rather by its superiority in applying organized violence. Westerners often forget this fact; non-Westerners never do.”

The Indian retail space is rallying for a similar clash. Except instead of organised violence, it is the superiority in applying venture capital from abroad.

If not already evident from the numerous court cases, administrative and legislative actions in the taxi space. Similar clashes have happened in the mobile retailing space where a mobile phone giant had to stop official sales to online stores because the general trade boycotted them. Today’s chemist strike is but another lesson.

What are Chemists striking against? The arrival of online medicine stores. These stores like all such businesses before it seek to move the sale of medicines away from your corner shop into the digital space. Or this is what it is in theory.

Even if we ignore the regulations and hazards (and there are many) around the sale of drugs. Since the way the services get marketed, the marketplace is  the final arbiter of trust. No matter who the final supplier. So, if a seller on an online marketplace screws up, it is the reputation of the marketplace that is impacted.

The online vs offline battle is set to escalate very rapidly remaking industries as we go, as the benefits of cheap connectivity is rapidly spreading through the country.

While new age entrepreneurs are attempting to build such digital marketplaces across the country, the offline marketplaces are pretty much left bereft of any advantages of technology at a large scale. Traditional technology interventions have been clunky, expensive and take so much time to deploy and manage, that the world has already moved on to something else by the time you have fully realised the benefits of that deployment.

It's time to Uberise offline retail.

Friday, May 15, 2015

Why Net Neutrality is good propaganda...

...and that's about it.

Before I start...

I am a big proponent of Net Neutrality. The reasons are numerous. My favourite is the example of Telecom companies destroyed the mobile VAS business. The case for it has been made many times over and is summarised by Ankur's piece in the Business Standard.

What is of course amusing is that one set of people who essentially profess to be capitalists are taking up what is essentially a socialist cause.

That said, Samir Jain (of BCCL fame) once introduced me to the concept of "अनेकान्तवाद", ie no single view is the complete truth and from there the ability to hold multiple conflicting points of view in one's head. Also, a person of intellect, like a lawyer, should be able to argue both sides of a case.

The above, put together with the pitiable state of defence of their case by Telcos, inspired me to put a cogent alternate point of  view.

With the preamble out of the way, here's my argument:

Net Neutrality is good propaganda... and that's it. It's not a good thing or a bad thing. Just good propaganda.

Before we get into the thick of it, a quick look at the actors.
  • In one corner: The big bad Goliath like Telecom companies which are fleecing us (They are. But that's a topic for another post)
  • In opposite corner: The innocent David like publishing/app companies who can do no wrong and are battling for Us. (The ones  currently winning the propaganda war)
  • In yet another corner: The indifferent regulator (Who is 'allegedly' in the Telcos pocket)
  • In the final corner: Us, the innocent consumer (Who doesn't know what's happening) 
(there are more corners, but lets keep this simple)

I don't want to get into what is Net Neutrality. Briefly, it is the principle that Internet service providers and governments should treat all data on the Internet equally.

You can read the rather comprehensive article on Wikipedia to get a low down.

Broadly the arguments that have been made thus far by the different actors:

The Investment argument (against net neutrality)

The Telcos say that they are investing in licenses, infrastructure, adhering to complex regulation (read snooping access to govt) etc. Why is someone else allowed to ride on that infrastructure.

This is exactly the wrong argument to make. Telcos have been the stars of the Indian economy over the past decade or so, where the best run companies have ROCE in the top tier bracket.

So clearly no one is going to have sympathy when a service provider, that has traditionally overpriced broad band, with scads of profit, whines about investment.

The nobility of publishers argument (for net neutrality)

Publishers would like you to believe that Telcos need to be a dumb pipe, so that they can deliver superior content/experience etc to you.

Whereas, the fact is, to the publisher, you are a product (ie an audience) that needs to be sold to an advertiser.

Publishers, who want to make money, often give us free content, so that we can be packaged and sold as an audience. Some publishers even say, that if you pay for content, there will be no ads.

I don't hear anyone making the argument, that all readers should be given similar treatment. Either all paid or all free.

There is nothing noble in this.

Dumb sheep argument 

Customers are dumb and can't discriminate between what they are getting for free and what they have to pay for.

Other Neutrality driven businesses

Do read through some business where neutrality arguments could be made.

Taxi space
Ola/Uber subsidising drivers so that the cab is cheap for you the user is a case of cab-neutrality. No one makes the argument that Ola/Uber should price their cars at the same price as radio cabs. The fact that unlicensed cabs (initially) gave huge subsidies to attract users to their service could be termed as a case of violation of cab-neutrality. Hey, it is a utility. Right?

Mall as a dumb pipe
Mall is a public space that attracts audiences for shopping. No shopkeeper demands equal access to all the shoppers. Fact is Mall real estate pricing reflects the unequal access that a shop would get.

Parking for a Self Drive
The self drive car rental business (An industry that I am currently part of) heavily relies on access to parking from other commercial entities. I can't make the case to anyone, that access and pricing to the service be the same. What I get is a function of my luck and negotiating skills.

The Net Neutrality argument hinges on the following:
Telcos are a utility and a dumb pipe and have no pricing flexibility. Only companies monetising audiences have a right to price their services differently.
All this changes the moment you say the following:
The telco is a media entity. Telcos have a right to monetise the audiences
Tiered access as a solution

Most Net Neutrality champions are comfortable with the thought that advertising is a subsidy. Why should you have to treat Internet access differently, as long as the choice of higher priced 'open' internet remains available to customers.

So, think about it. A telco can declare itself to be an media company and sell access to its subscriber base. The subscriber can be given an option to opt for cheaper internet in lieu of  the privilege of some websites being zero rated (ie free of bandwidth caps) and the rest of the websites fall under the metered cap.

The idea above is neither radical, nor new. The Media industry/ app universe already uses it routinely and what's more the Telco business uses it routinely when it creates off network and on network pricing  or Friends and Family calling packs. Only in this proposed scenario someone else pays (app/media company etc) for it.

Or even better, create a data only MVNO called Free Internet. Get popular websites to jump on to it (for a fee), through in some public service websites like Wikipedia and archive.org (oops, is that still banned by GOI?) and you are done. 

Tuesday, August 12, 2014

The Return of the Mobile browser

We all love to make predictions and I made one to @shachinb and Steffen Harting when I met them in early 2014. 

Which was: Apps are  temporary phase (of indeterminate length), eventually most apps will switch back into the web browser. Only games and apps that require continuous access to phone sensors such as accelerometer,  GPS etc will remain as apps. For most other purposes a well designed mobile website is going to do a world of good.

So, when Forbes declared that  the mobile browser is dead and the mobile app is the new new thing, I retested my earlier hypothesis and came to the same conclusion. I.e. We are hung up on apps way more than required

Due to this hang up, we are sacrificing the mobile web experience.
It pleased me no end to see an old friend @jassim make this comment
Super impressed with the Twitter mobile web experience, replaces the app for me
This just goes to show it is possible to achieve what I stated as a hypothesis above.
One look at the NDTV mobile website and then compare to their mobile apps tells the tale of neglect.
If a relatively complex twitter app can achieve customer satisfaction to the point at which, a customer is ready to junk the app. Surely much simpler media applications can present a much better mobile website.

Consider the advantages:
Unified code base that just works. Regardless of underlying OS.
If a new OS comes along. Insert into a wrapper/container and you are ready to go.
I know of relatively large Internet companies who say our mobile focus is on Android and iPhone. Whereas the focus should be on a seamless mobile experience regardless of whether you use the app or the mobile website.

If the Twitter example is not good enough. Consider Facebook. Identically, their mobile website is as rich in UX as their mobile app.

In fact the early movers who paid OEMs for app pre-install's are now slowly moving away as they saw limited utility/adoption from that exercise.

Time to take a step back and reassess how we view mobile browsers and take the right sustainable development framework.

Saturday, May 18, 2013

Spot-Fixing: An evolution of the Gentleman's game.

A lot (ok, some) of you would have heard about the spotfixing scandal that has broken out and with every passing day an even bigger (sleazier?) story comes out to keep the momentum going. Sick of it? Sick of the corruption that afflicts Indian society? Fear not I have two bits to talk about that will restore your spirits.

The first is actually a rewind to incidents, not here in India, but in the USA. Sports and gambling related indiscretions are part and parcel of their history. Some came out in the press and created news like IPL6 is and others were brushed under the carpet.

The second is a slightly different take on the current series of events. Betting and fixing scandals have been around since... well... let's say a long time. When cricket was played not as often as now and national pride was at stake. Fixing was a no no no.

But the game evolved to give us IPL and manufactured loyalty (purportedly basis where the team is located). Consider the following: Since, there are no geographic restrictions of players or of owners or anything that remotely tie in the team to it's home location. IPL, like reality TV, is known more for the news it generates of the field than it does on the field.

Given the above considerations (amongst many others) we can safely class IPL as inoffensive entertainment (something, a large number of people will agree with).

This brings me to my second point. Why not allow spotfixing? It is entertainment after all. If reality TV can be fixed, IPL can be fixed too.

How will this work?

Just divorce yourself from the fact that IPL has anything to do with sport and everything to do with entertainment. Just imagine the possibilities when spotfixing is allowed. From being mere sport, it will become a gigantic reality (TV and otherwise) show with elements like intrigue, politics, wine women and song coming in to play.

It will become a game of grand strategy. The sort that nations play with each other. Kids who follow IPL will learn that life is cruel and will be better prepared to handle it. They will learn to recognize nuances and react accordingly. Pick winners basis realtime information and also modify stands basis shifting loyalties.

For this to really work and be even handed. Betting/Gambling too would have to be made legal. This will allow crowd-funded pressure to act against well funded teams/entities trying to seek a particular outcome.

There will be some caveats. The fixed components will have to be announced in advance. Not the actual act, but say the number of acts against and for each team. Total number of actors etc.

The complete gameplay can be revealed post-match and will allow for more ooh-aahs for one more day. This will create an added benefit of dragging coverage for post match strategy and analysis.

If you have any suggestions to make this better, please leave a comment.

Saturday, January 19, 2013

Why Patent Law in India needs to allow Software Patents

A few weeks ago, I got an idea for a product. Instead of sitting on one side and letting the idea slide. I decided to try and patent it.

The idea and even the category it operates in are immaterial to this piece.

While I am still figuring out the patent part of it. I realized that software patents are not possible in India while they can be patented in the US.

In India, the only way you can patent software is if it is closely linked with hardware i.e. software is intrinsic to the functioning of the hardware. Effectively, impossible.

I believe a similar situation existed in the US before as well. However, some time back they changed their process to explicitly allow software patents. Result. US has a huge body of patents which American companies use to bludgeon every other company to death.

India, on the other hand did not do evolve with time. High time, India allowed for a more accommodative patent regime that allow Indian inventors and companies a similar edge.

The current age is all about software (Software is eating the world so to speak). Intellectual Property is Property. When you refuse to recognise claim on such property, you essentially denied someone the chance to become wealthier. India claims to be an intellectual powerhouse. What use is that power, if we can't stake claims to it and therefore make money on it.
Further, I'd venture that people in India against Software Patents are the "new age digital socialists". A capitalist would recognise the right to property and be for it.

Will there be situations where a guy sitting in a small town will get royalty from mega-corporation for a piece of software he dreamed up? Yes and that's fantastic.

Will it be misused? Possibly. Better to recognise the right and build safeguards, than to deny Indians an opportunity to get wealthier.

Ideas matter and increasingly software is a way to bring those ideas to life. And software patents are a way to monetise ideas and bring prosperity to a wider set of people.